Zero Downpayment Mortgage Would Aid 50,000 First-T
Washington, DC, July 1--The nation’s home builders told Congress that a bipartisan legislative proposal establishing a pilot program for Federal Housing Administration (FHA) insurance of zero downpayment mortgages would mean that "50,000 families would be able to achieve homeownership who would otherwise be denied the opportunity."
Appearing before the House Subcommittee on Housing and Community Opportunity, David Wilson, president of the National Association of Home Builders (NAHB) and a custom builder from Ketchum, Idaho, testified in support of H.R. 3043, the Zero Downpayment Pilot Program Act of 2005, introduced by Reps. Patrick Tiberi (R-Ohio) and David Scott (D-Ga.).
"This legislation continues a long tradition of innovation at the FHA by addressing a primary obstacle preventing many minority and low- and moderate-income families from becoming home owners -- the lack of funds necessary for a downpayment," said Wilson.
The bill would allow the FHA to insure up to 50,000 zero downpayment mortgages for first-time home buyers. The pilot program is designed to be financially self-supporting while building a record of homeownership success.
Home buyers would be required to pay a 2.25 percent mortgage insurance premium (MIP) for the loan upfront, compared to the 1.5 percent that is required for an FHA single-family loan with a 3 percent downpayment, and an annual MIP of 75 instead of 50 basis points for the first five years of the loan.
Monthly mortgage payments would be slightly higher than for a standard FHA-insured mortgage and home buyer counseling would be mandatory for all buyers who participate in the program.
"This prudent approach would allow the FHA to insure the no-downpayment loans in a safe and sound manner without harm to its insurance funds," said Wilson.
To assure that the legislation reaches as many households as possible, NAHB is pleased that H.R. 3043 would also apply to condominiums and cooperatives.
"In many communities across the nation, these homeownership alternatives are more within the financial reach of low- and moderate-income families than single-family detached homes. Condos and co-ops can provide the same wealth-building benefits for families and also bring stability to neighborhoods," said Wilson.
Noting that members of NAHB work daily with families who are struggling to join the nation’s homeownership roster, Wilson told lawmakers that H.R. 3043 would help to "close the housing affordability gap and expand the number of those who can share in the American dream of owning their own home."
